US Republicans scrap 'Plan B,' fiscal cliff deal elusive

A controversial Republican plan to let tax breaks expire on millionaires crashed to defeat on Thursday when it failed to earn enough party support, leaving negotiations on averting the "fiscal cliff" up in the air.

House speaker John Boehner had confidently predicted he would muster sufficient support for his "Plan B" to put pressure on President Barack Obama to break the year-end stalemate over how to avoid the tax hikes and mandated spending cuts set to kick in on January 1.

But conservatives – many of whom openly opposed the plan as a tax hike for the rich and a political ploy for Boehner – revolted, and the speaker, who sought to use the vote as leverage in his talks with Obama, was forced to pull back.

"The House did not take up the tax measure today because it did not have sufficient support from our members to pass," Boehner said in a statement late on Thursday after calling a brief meeting with his Republican caucus.

"Now it is up to the president to work with Senator (Harry) Reid on legislation to avert the fiscal cliff."

House majority leader Eric Cantor said the House now stood adjourned until after Christmas.

"Plan B... is a multi-day exercise in futility at a time when we do not have the luxury of exercises in futility," White House spokesman Jay Carney said hours before the vote in the House of Representatives.

"It cannot pass the Senate. The president would veto it."

Shortly after Plan B crashed to defeat, Carney put out a more conciliatory statement saying a "bipartisan solution" was still possible.

"The president's main priority is to ensure that taxes don't go up on 98 percent of Americans and 97 percent of small businesses in just a few short days," Carney said.

Obama "will work with Congress to get this done and we are hopeful that we will be able to find a bipartisan solution quickly that protects the middle class and our economy."

Boehner's plan would have extended George W Bush-era tax breaks for everyone apart from those earning more than $1 million a year and also redirect automatic spending cuts away from defense to other programs.

But the White House charges that the bill would offer big tax breaks to wealthy Americans earning less than $1 million who do not need them.

Obama originally insisted on letting tax cuts expire on households earning more than $250,000 and has since upped the threshold to $400,000 in a bid to reach a compromise.

Republican deficit hawks were initially unhappy that the bill did nothing to cut government excess – which they see as the main driver of the runaway deficit – prompting their leaders to sweeten the pot with a companion spending cut bill.

The showdown, part of now traditional festive season brinkmanship between Republicans and Democrats, has shown that Obama's re-election win did nothing to ease the dysfunction gripping Washington.

But neither side is willing to give an inch, as they know the episode has deep implications for the balance of power in Obama's second term.

Boehner's tactics have mystified many Washington watchers, with some believing he is unable to sell any deal with Obama to his restive caucus and so is looking to defer the blame for the failure to reach an accord.

What the speaker discovered was intensifying opposition from the right – with conservatives who see raising taxes as apostasy balking at being asked to hike any rates.

"It's very embarrassing for the speaker, and it demonstrates what many of us said all along, which is that he unfortunately cannot control his own Republican caucus," Democratic congressman Chris Van Hollen told MSNBC after the plan's collapse.

"Now it's time for Speaker Boehner to either let the House vote on the proposal the president has put forward or give up the game."

The White House insists the two sides are not that far apart and officials privately say Obama has compromised on issues like Social Security retirement benefits and tax rates that have already angered liberal supporters.

Boehner has said he would be satisfied with a balanced $1 trillion in tax revenues and $1 trillion in spending cuts, much of it from entitlement programs like Medicare health care for the elderly, as part of a 10-year deal.

Obama's plan offers $1.2 trillion in new tax revenues, with just under $1 trillion in spending cuts – though Republicans dispute whether all of the austerity measures are real.

"They're a couple hundred billion dollars apart. This is absolutely senseless that the Speaker is doing what he's doing. These are gyrations that I've never seen before," said Democratic Senate leader Harry Reid.